Perspective: Microsoft-Yahoo the mother of all clusterbombs

perspective I found the perfect description to sum up the idea of a Microsoft-Yahoo combination, but CNET News.com's managing editor threatened to knock my lights out if I dared use that original F-word headline.

Seeing how I need to be in tip-top condition to view a New York Giants' upset on Sunday, I've settled on "clusterbombs."

You get the idea.

Am I being overly grumpy? Since we're going into Super Bowl weekend, I was reminded that when the Dallas Cowboys traded Herschel Walker to the Minnesota Vikings in October 1989, most football experts thought the Cowboys got the raw end of the deal. They had dealt away perhaps the best running back in the game in return for a collection of no-name role players and six future draft picks. The upshot: Dallas won three of the next eight Super Bowls while the Vikings are still on the schneid.

But software is a harder contact sport than football, and for Microsoft to pull this off, Microsoft CEO Steve Ballmer will need to throw one hell of a hail mary pass. Naturally, the big money players are rooting for him to be successful. This is a deal armchair strategists and Wall Street stock pumpers have been in love with for the last couple of years. Yahoo's been a weak stock and they'd love to make a profit on what's been a lousy investment.

This is a deal armchair strategists and Wall Street stock pumpers have been in love with for the last couple of years. Yahoo's been a weak stock and they'd love to make a profit on what's been a lousy investment.

Take a gander at the early analyst reactions pulled together by Henry Blodget over at Silicon Alley Insider:

Imran Khan at JP Morgan: "Microsoft and Yahoo will likely encounter little resistance from regulators, since their combined share of the search market would only be around 30% compared to Google's 60%. The combination would give Microsoft much needed scale, which would be invaluable in challenging Google...Further, we believe the increased scale of the combined search entity would lead to improved monetization due to a number of advertisers, which positively impact coverage, click-through rates, and pricing. Microsoft's command of access points through Windows, Xbox, and Internet Explorer would enable it channel yet more search. This is a crucial synergy."

Citi's Mark Mahaney: "For Microsoft or any other company seeking to gain scale in Internet advertising, Yahoo is an obvious strategic choice given its position as one of the top 3 Web properties worldwide." Citi cautioned against over-enthusiasm, noting that while the prospective merger would "pose a greater competitive risk to Google. But near-term, we'd be skeptical that search users' overwhelming preference for Google would change."

Sandeep Aggarwal, Oppenheimer: "We believe that in the long run both Microsoft and Yahoo as a combined company might emerge as a stronger competitor for Google, but lots of developments would have to take place before that happens.

• Google owns nearly 75% of the search market and Microsoft and Yahoo together own nearly 18% of search marketing.

• Display advertising is the second largest online ad format at 33% of total worldwide online advertising. Google currently owns less than 2% of the display market (with DoubleClick this would increase) and Microsoft and Yahoo together own nearly 30% of display market.

• With this move, the likelihood of the EU rejecting Google's acquisition of DoubleClick goes down.

• Regarding VCLK, as the largest independent ad network, we view them as a beneficiary of industry consolidation and a leading takeout target."

And on paper, at least, you could make a plausible argument on behalf of doing a deal. Ballmer gave voice to the bigger-is-better crowd, contending on the conference call earlier Friday that the combination will translate into increased scale and capacity (at least from a consumer perspective).

In other words, 1 plus 1 equals 2 (and whatever extra can be squeezed out). That equation may add up in the field of standard mathematics, but this is the real world. The deal makers at Microsoft say they know what they're doing but they're competing against history. Even if a reconstituted "MicroYahoo" doesn't wind up in the Bonehead Hall of Fame along such stinkers as Excite@Home, Yahoo-Broadcast.com (which saddled us with Mark Cuban forever!), Compaq-DEC, and, of course, AOL-Time Warner, this will be a huge headache.

Yahoo had its day in the sun. That's over. These days Yahoo is a severely dysfunctional, overstuffed company riddled by an indecisive bureaucracy.

Jerry Yang, who last year returned to take the helm after Terry Semel got sent into a platinum retirement, doesn't have a clue how to dig the company out of its hole. If he wasn't the guy to run Yahoo when Tim Koogle was CEO, why is Yang the guy to be No. 1 now? Since taking over, he's mumbled his way into a bigger disappointment that I ever expected. From a Yahoo perspective, the best thing now would be to take the lifeline tossed its way from Microsoft and let Ballmer handle the mess that awaits.

So if Microsoft ends up with the prize, save the early celebrations. The uneven track record of big technology deals over the last decade or so suggests that this will tax the company's managerial talents more than at any point in Microsoft's history. Don't forget that the impetus behind the buyout bid stems from Microsoft's woeful inability to compete against Google. Is Steve Ballmer really that much smarter than Steve Case?

Biography
Charles Cooper is CNET News.com's executive editor of commentary.

More Perspectives

[imacpwr]

The mother of all clusterbombs...?!?

Chucky, with headline like that you really have to apply for a job at
The National Enquirer..!!

[imacpwr]

The mother of all clusterbombs...?!?

Chucky, with headline like that you really have to apply for a job at
The National Enquirer..!!

[-fjtorres-]

Everybody assumes this deal is about search...

What if it isn't about search at all?
What if, instead, it is an encirclement move?
Google rules web search and they are trying (without much success) to break out into the broader web 2.0 arena. Yes, Gmail is mildly successful. Youtube draws views but revenue? Unclear, so far...
Yahoo has a lot of valuable web "storefronts" and products that can be combined FEDERATED STORES-style, into a highly attractive advertising "mall" of sorts when combined with the products MS already has and is developing.
Also, consider that MS has been looking for somebody to, in effect, manage their MSN properties without much success so this could be a way to bring in an experienced new team of middle managers to the fold.
In other words, MS may be buying Yahoo to get Yahoo to take over MSN, etc. It may not be the Yahoo guys that go packing in the consolidated operation, but rather the MS online guys.

Considering the cost to MS of this buyout works out to something like 15 months worth of profits (=maybe half their current cash stash) the deal makes plenty of sense on both ends.

The real question then becomes, what does google do? Time Warner doesn't seem interested in selling AOL so maybe the way to go is for google to buy ADOBE.

Think about that one...

[-fjtorres-]

Everybody assumes this deal is about search...

What if it isn't about search at all?
What if, instead, it is an encirclement move?
Google rules web search and they are trying (without much success) to break out into the broader web 2.0 arena. Yes, Gmail is mildly successful. Youtube draws views but revenue? Unclear, so far...
Yahoo has a lot of valuable web "storefronts" and products that can be combined FEDERATED STORES-style, into a highly attractive advertising "mall" of sorts when combined with the products MS already has and is developing.
Also, consider that MS has been looking for somebody to, in effect, manage their MSN properties without much success so this could be a way to bring in an experienced new team of middle managers to the fold.
In other words, MS may be buying Yahoo to get Yahoo to take over MSN, etc. It may not be the Yahoo guys that go packing in the consolidated operation, but rather the MS online guys.

Considering the cost to MS of this buyout works out to something like 15 months worth of profits (=maybe half their current cash stash) the deal makes plenty of sense on both ends.

The real question then becomes, what does google do? Time Warner doesn't seem interested in selling AOL so maybe the way to go is for google to buy ADOBE.

Think about that one...

[igl00lgi]

What do you have when you combine the two?

Not a clusterbomb but a cluster-f... well you get the point. Two failed teams with the same initiative when combined still equates to two failed teams. All the while google is not playing catch up but is making new ground to cover and conquer. Even after this buy out the combination is still in the rear view mirror. Will Microsoft ever learn how to innovate without force feeding and p-off their customers? Talking about a stagnant stock yet to remain as such. Yahoo has stores? Who knew? Yes sir good combination.

[igl00lgi]

What do you have when you combine the two?

Not a clusterbomb but a cluster-f... well you get the point. Two failed teams with the same initiative when combined still equates to two failed teams. All the while google is not playing catch up but is making new ground to cover and conquer. Even after this buy out the combination is still in the rear view mirror. Will Microsoft ever learn how to innovate without force feeding and p-off their customers? Talking about a stagnant stock yet to remain as such. Yahoo has stores? Who knew? Yes sir good combination.

[wildchild_plasma_gyro]

What interested investors should look for

Effective Computer Farming and good solid attractive Services.
If this pair can make those things better with their partnership then Google and Yahoo_MSN could enter a good strong horse race.
Another thing i would watch out for with this is how well other interest groups are bought in on the effort and used to make even more profit for all alongside !!!!!!individuals(Ummmmm my day will come).

[wildchild_plasma_gyro]

What interested investors should look for

Effective Computer Farming and good solid attractive Services.
If this pair can make those things better with their partnership then Google and Yahoo_MSN could enter a good strong horse race.
Another thing i would watch out for with this is how well other interest groups are bought in on the effort and used to make even more profit for all alongside !!!!!!individuals(Ummmmm my day will come).

[ggrs34]

Coop - Blinded by bigotry

Sad Little Coop is linded by his bigotry of Microsoft, oh for the glory days of the 1990's when Apple ruled.

Retire Coop, you're past it.

[ggrs34]

Coop - Blinded by bigotry

Sad Little Coop is linded by his bigotry of Microsoft, oh for the glory days of the 1990's when Apple ruled.

Retire Coop, you're past it.

[sumwatt]

Microsoft wants to buy a Linux shop?

I'm sure Yahoo has plenty of MS products in the organization but I find it almost humorous that MS is buying a traditionally *nix and open-source shop.

[sumwatt]

Microsoft wants to buy a Linux shop?

I'm sure Yahoo has plenty of MS products in the organization but I find it almost humorous that MS is buying a traditionally *nix and open-source shop.

[tuomoks]

One statement in story

"this will tax the company's managerial talents more than at any point in Microsoft's history" is so true! MS has a lot of good, clever people but, as far as I have seen, the current management doesn't count, sorry. They still think small - small meaning desktop or one application. You know that capacity planning in MS means measuring a program or one connection, how they ever think managing a huge network? I miss BG, at least he thought the whole picture (really) instead just one product or organization. It would be great if they could get their action together but it is extremely difficult in any company of that size. Politics and egos running high! I like Google but there should be something creating a competition and I don't think that without radical changes how MS works today they can do it. You can only force your way a limited time and when someone offers a better, cheaper, friendlier, what ever way, you lose your users very fast. For us, technology people, it is not a problem, we can jump back and forth but the mainstream turns slowly.

[Sumatra-Bosch]

Mr. Cooper, It's Called A Yapocalypse !

Right on all counts except I don't think Mr Cooper really has an appreciation of the depth of Yahoo employees' revulsion for Microsoft. One exec I know there refuses even to use Word. He writes all his memos and plans in an HTML editor. The place will be completely emptied of any talent in about six months. The key personnel will be replaced with Borg who will be devoid of original thought and will spray money indiscriminately into vague notions they'll glorify as development plans. Spam will overwhelm users who are already running for the exits. Ballmer will be arrested on Route 101 for head-butting cars and shouting at drivers to look at more ads.

[Sumatra-Bosch]

Mr. Cooper, It's Called A Yapocalypse !

Right on all counts except I don't think Mr Cooper really has an appreciation of the depth of Yahoo employees' revulsion for Microsoft. One exec I know there refuses even to use Word. He writes all his memos and plans in an HTML editor. The place will be completely emptied of any talent in about six months. The key personnel will be replaced with Borg who will be devoid of original thought and will spray money indiscriminately into vague notions they'll glorify as development plans. Spam will overwhelm users who are already running for the exits. Ballmer will be arrested on Route 101 for head-butting cars and shouting at drivers to look at more ads.

[wildchild_plasma_gyro]

IBM

With the world wanting to progress so fast there needs to be Skilled professionals at hand to make sure all the workings of the worlds macros actually don't fall apart and can function proficiently.
IBMs role is not to try and out Google Google or Out Microsoft Microsoft. Although Having expert capabilities with both professions could help IBMs functionality IBMs market is one of stability and high performace.
IBM is made up of many highly skilled professional technically minded individuals and its is in Maintainance, Excelence and odd little Engineering Avenus that IBM needs to be.
If IBM Did focus on Small business holistical OS's and target all with a Google of googles then who knows what would be falling apart and not up to scratch with the ground work the engineeris were supposed to be doing. Yes indeed there is room for IBM to work well in the market and profit but IBM is a group with functionality in mind and with all the demands the world has we need it more than Ever.

[wildchild_plasma_gyro]

IBM

With the world wanting to progress so fast there needs to be Skilled professionals at hand to make sure all the workings of the worlds macros actually don't fall apart and can function proficiently.
IBMs role is not to try and out Google Google or Out Microsoft Microsoft. Although Having expert capabilities with both professions could help IBMs functionality IBMs market is one of stability and high performace.
IBM is made up of many highly skilled professional technically minded individuals and its is in Maintainance, Excelence and odd little Engineering Avenus that IBM needs to be.
If IBM Did focus on Small business holistical OS's and target all with a Google of googles then who knows what would be falling apart and not up to scratch with the ground work the engineeris were supposed to be doing. Yes indeed there is room for IBM to work well in the market and profit but IBM is a group with functionality in mind and with all the demands the world has we need it more than Ever.

[wildchild_plasma_gyro]

Yep i see

Your saying that more needs to be done in the big picture.
Well i'm Saying that problems can be solved. Like the idea of Macros linked to specialists and innovators helping crop yeilds or groups working with IBM developments helping the Airport situation.
However to solve these things individual inclusion into the system is whats important.
What i was saying is that investors should clock how well Microsoft and Google make use of these Farms and how well they include people to work markets better for the economy.
You definitly have a point with their current technical detials needing to be dealt with.
HP needs to think out side of the box and so does Dell.
For example if more intergrated services were to come about making lowwatt and speciallist systems more approprite.

Examples
Eco PC's, Child PC's Student PC's, Consumer Rendering and Array Calculator devices.
Digital remastering stations.

The problem here is that HP has gone for Effciency and made deals with outsourcing group in a lot of ways because the staff their at present are more loyal and cheaper.
However These extra markets can generate extra revenu and spreed the load.
The problem is CIA opression of intelligent individuals making Govenment dependancy and intervention more wanted and other peopls war more acceptable.

However the Market in the US is still a central hub of educated hardworking people quite capable of rising above any ragime especially if in a place of greater need.

Buddy we've just spun an extra billion talking here.

[wildchild_plasma_gyro]

Yep i see

Your saying that more needs to be done in the big picture.
Well i'm Saying that problems can be solved. Like the idea of Macros linked to specialists and innovators helping crop yeilds or groups working with IBM developments helping the Airport situation.
However to solve these things individual inclusion into the system is whats important.
What i was saying is that investors should clock how well Microsoft and Google make use of these Farms and how well they include people to work markets better for the economy.
You definitly have a point with their current technical detials needing to be dealt with.
HP needs to think out side of the box and so does Dell.
For example if more intergrated services were to come about making lowwatt and speciallist systems more approprite.

Examples
Eco PC's, Child PC's Student PC's, Consumer Rendering and Array Calculator devices.
Digital remastering stations.

The problem here is that HP has gone for Effciency and made deals with outsourcing group in a lot of ways because the staff their at present are more loyal and cheaper.
However These extra markets can generate extra revenu and spreed the load.
The problem is CIA opression of intelligent individuals making Govenment dependancy and intervention more wanted and other peopls war more acceptable.

However the Market in the US is still a central hub of educated hardworking people quite capable of rising above any ragime especially if in a place of greater need.

Buddy we've just spun an extra billion talking here.

[wildchild_plasma_gyro]

$1

thats one dollar that pays for a server.
thats one server that lets a women make a profitable channel
thats one workman who pays the farmer for his fine new purple carrot cake chosing the super healthy option becasue these women ect who were doing other things now want his workmanship.

And thats Economics

So thats one shop that stocked the carrot cake not scrapping the stock today and hence not increasing the price of the other items.

all from the power of 1 dollar that American family payed the server farm dude with.

That market of level of social capitalism could exsist its just waiting for an opening and better software.

So whats in the way the dollar spending, the capital wealth.

Nope
the lack of trained software engineers and clever managers.

Why
1) Cultural apathy
2) Militerial Opression
3) Greed at the top
4) over Taxation (poor individual service return) and poor governmental management of an otherwise superb economy for political gain.

Whats not in the Way

Access to Education
Market Capital
The Internet

However if that Dow goes down Millionares will be thinking what they can do to make sure their market isn't stung long bofore the Xenu Scientologies would be attempting to get the upper hand for their 60 year war.

Of course if the Dow goes down All the millionares are going to be the best frien of social networks trying to ensure their rise back up in the market and they're gonna wanna help everybody they can succeed in the market.

So what happens instead.
They hit the poorest groups, First helping them inproperly and to rapidly on purpose and then go look the bubbles burst in the housing market.
Thats what they did.
That way you don't challange their opression in such prosperious times you just look at how Dell and HP are struggling in a market that they wanted to sorce to the wide world and work with the wider world with over the interests of US citizens in the first place.
This way you complian on some system like news.com about the apocoliptic notion of how the US is going to the dogs.
At the Same time The CIA is larger than ever recuiting all the desprite people you just convinced and your millionare who might sceme his way in better and tap the US market is warded and blocked.

Oh yes it works that way.